The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  RPAR Risk Parity ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The management team doesn't personally invest much alongside shareholders. This is a large contributor to the strategy's Below Average People Pillar. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in the Latin America region and has a substantial underweight in developed markets regions compared with category peers. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including low portfolio manager turnover but is held back by a below-average success ratio across its lineup.

Analyst Rating

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Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. RPAR Risk Parity ETF earns an Average Process Pillar rating. The main driver of the rating is the firm's five-year retention rate of 100% over the period. The process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

This strategy produces a fixed-income to equity breakdown that hews closely to the typical Moderately Conservative Allocation category peer, with a 51.2% to 29.9% fixed-income to equity weighting. Its equity sleeve is consistently tilted toward both smaller market-cap and value-oriented companies compared with category peers. The strategy has three region or sector biases compared to category peers. The most notable is its consistent overexposure to the Latin America region. It has also maintained an underweight position in developed markets regions. And finally, the portfolio has a consistent and large overweight in the basic materials sector. 

 The portfolio is overweight in basic materials and energy relative to the category average by 16.4 and 11.9 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, underweight the average by 7.3 and 6.7 percentage points of assets, respectively. The portfolio is overweight in Emerging Asia and Australasia regions relative to the category average by 9.7 percentage points and 4.3 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Emerging Europe, with North America underweight the average by 28.3 percentage points and Emerging Europe similar to the average.

Average

Process

RPAR Risk Parity ETF earns a Below Average People Pillar rating. The team benefits from the firm's five-year retention rate of 100%. However, the rating is limited by the combined average five-year excess return of each manager, which suggests that the funds they manage have fallen short of their respective category average. The number of months that the management team has been running this vehicle together also holds the rating back.


The team is backed by Michael J. Venuto, the longest-tenured manager on the strategy, who brings 11 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, demonstrating underwhelming risk-adjusted performance. Michael J. Venuto has an experienced listed co-manager. Together, they average 11 years of listed portfolio management experience.

Below Average

People

In a competitive industry, Evoke doesn't differentiate itself enough, leading to an Average Parent Pillar rating. Portfolio management turnover has been minimal at the firm since the firm's inception. Long-term stability indicates a strong investment culture. The firm's lineup has had discouraging initial results. Its three-year success ratio is 0%, indicating that of the strategies with a three-year track record, 0% have both survived and beaten their respective category median. A low success ratio not only indicates weak performance but also provides insight into a firm’s discipline around investment strategy and product development. The Evoke roster of open-end and exchange-traded funds has had below-average risk-adjusted performance, as seen in its average three-year Morningstar Rating of 1.0 stars.

Parent

RPAR Risk Parity ETF

RPAR is an actively managed fund-of-funds allocating to four major asset classes: global equities, US Treasurys, commodities and TIPS based on risk parity.

By Derek Horstmeyer and Attila Kiss Risk-Parity funds have been in the spotlight recently as we have seen the first such fund offered here in the US as an ETF (Advanced Research Investment Solutions’ Risk Parity ETF – RPAR).

News for RPAR Risk Parity ETF ETF (RPAR)